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Lay-bys
Terms and conditions
Can goods on order be purchased on lay-by?
Inspection of goods
Cancelling a lay-by
Can consumers get a refund?
Case study
What is a lay-by sale?
A lay-by is a convenient and inexpensive way of buying goods. It is offered by many traders and is an alternative to using credit cards or store cards.
With a lay-by there are no credit charges to be paid. However, the consumer doesn’t receive the goods straight away. Consumers select the items they wish to buy and enter into an agreement with the trader to pay a deposit and the remainder of the cost in regular instalments. When the goods are completely paid for, the trader gives them to the consumer.
Lay-bys are generally used for goods available in stock and can be used for goods being made to order, but it is not advisable to enter into a lay-by for unseen goods. It would be better to wait until the finished goods arrive at the store.
Top of pageTerms and conditions
The paperwork for a lay-by sale is important as it sets out the arrangement between the consumer and the trader in a legal document. The time frame for the lay-by is flexible and could be anything from a few days to some months. It is entirely up to the consumer and the trader to decide. The trader is then obliged to hold the goods for that agreed period of time.
The lay-by statement
When a lay-by is made the consumer must get a written statement in the form of a sales docket or a receipt. This is sometimes called a 'lay-by statement'. The information contained in this paperwork should outline the terms and conditions of the lay-by agreement, including:
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the purchase price of the goods
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any deposit paid and the balance outstanding
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the dates on which instalments are due
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any cancellation charge that may apply
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the date by which the final instalment must be paid.
It is a good idea for consumers to ask about the lay-by conditions before deciding to use this facility.
What if there is no written lay-by statement?
If there is no written statement but there is a verbal agreement between the consumer and trader, a lay-by could still exist. Providing the consumer has their receipts, they still have the same rights. Verbal agreements are difficult to prove and enforce so consumers and traders should always confirm details of their lay-by in writing.
Can goods on order be purchased on lay-by?
There are no legal restrictions to prevent consumers and traders entering into a lay-by agreement for goods being made or on order. In the case of goods being made, regular payments by the consumer may allow the trader to meet ongoing manufacturing expenses. However, it is not advisable to enter into a lay-by agreement for unseen goods. It is better to wait until the goods arrive in the store and then purchase them.
Inspection of goods
a trader does not have to allow consumers to inspect the goods while they are on lay-by unless it is specified in the lay-by statement. However, if it is convenient, many retailers will oblige.
Cancelling a lay-by
a lay-by can be cancelled by either the consumer or the trader depending on the circumstances outlined below.
Cancellations by consumers
Consumers may cancel a lay-by at any time before the goods are delivered without giving a reason. If the trader won’t accept the cancellation in person or by telephone, consumers should put it in writing to them. There may also be a cancellation charge involved.
Cancellations by traders
The trader can only cancel a lay-by and keep the cancellation charge if the consumer does not honour the lay-by agreement (such as being late with a payment). The trader must firstly notify the consumer in writing or by telephone, and give them at least 7 days to fix the problem. The trader can’t demand full payment before the date set down in the lay-by statement.
Cancellation charges
A cancellation charge is an amount of money that the trader can ask to be paid if a consumer decides to cancel the lay-by before the agreement has finished. The cancellation charge must be specified in the lay-by statement.
Section 60L of the Fair Trading Act says a cancellation charge cannot exceed the sum of:
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an amount sufficient to recoup reasonable selling costs (including storage costs and administrative expenses) in respect of the lay-by; and
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an amount equal to the loss of value of goods - but the seller has to prove the value of the loss.
The Australian Retailers Association recommends an amount between $25 and $30 per lay-by, but some traders may charge more or less.
A consumer is entitled to a full refund only if:
- there is no written lay-by statement
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there is no specified cancellation fee on the lay-by statement
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the lay-by statement is misleading or deceptive
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the trader breaches any terms of the agreement
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the goods are not available as agreed in the lay-by statement.
Can consumers get a refund?
Once the lay-by has been completely paid, the transaction under the lay-by conditions is finalised.
If for some reason a consumer decides to seek a refund, the trader will consider this in the same way they would if it was a non lay-by purchase.
Case study
Jeremy’s shoes
Jeremy had a pair of shoes on lay-by for three weeks. He decided to cancel the lay-by because he had seen another pair of shoes that he preferred in a competitor's store. He approached the shop's manager, asking for a complete refund of the money he had paid so far. The manager told Jeremy that he could only have a part refund because he would be charged a fee for cancelling the lay-by.
Jeremy took the matter to the Office of Fair Trading where it was revealed that the retailer had disclosed the cancellation fee to Jeremy at the beginning of the lay-by (on the lay-by statement).
Jeremy was informed that because he had been provided with this information up-front, he was entitled to only a part refund.